Elk Point refinery unfeasible

Jul. 12, 2007

Written by

Loren G. Flaugh

Primghar, Iowa

Almost from the moment Hyperion Resources announced on June 13 the possibility of a 400,000 barrel per day crude oil refinery at Elk Point, I was skeptical. In short, I treated the announcement as a joke.

I knew it wasn't a serious proposal for an Elk Point site or anywhere in the Midwest, for that matter. Almost 20 years of experience in the oil and gas industry told me a 400,000 barrel per day oil refinery is something you often see in Saudi Arabia or the Middle East. I believe there might be one on an island in the American Virgin Island chain. Though I might be wrong, I don't believe there is one in the Houston or Gulf Coast areas.

I was at the South Dakota Public Utilities Commission hearing in Yankton. I clearly heard TransCanada officials say there was no conspiracy, collusion, connection or relationship between TransCanada and Hyperion Resources. That was simply inadvertent speculation brought on by the Sioux Falls and Sioux City area television and print news media.

Though some of the reporters who started covering the story when it broke might have used the word "could" when saying that the crude oil to the refinery "might" come from TransCanada's crude oil line, the general public was so excited, it took the next step and read in the word "would" as if it were already a done deal. Maybe Hyperion assumed that the public would.

Simply put, if Hyperion Resources is to plant a 400,000 barrel per day oil refinery at Elk Point, it will have to build its own $1.5 billion, 30-inch crude oil line to Fort McMurray, Alberta.

Can an Argus Leader business reporter interview Gov. Mike Rounds and make him understand that Hyperion would have to build its own pipeline? As much as anyone, Rounds has perpetuated the myth that building a 400,000 barrel per day refinery is something that's easily done.

Also, is there any way the Sioux City and Sioux Falls area television and print media can force Hyperion into returning to Elk Point and holding another press conference? At this second press conference, it could propose something feasible such as a 75,000 barrel per day, state-of-the-art oil refinery at Elk Point.

Maybe, just maybe, if Hyperion apologizes to TransCanada, TransCanada would treat it equally, like all the other refining companies that already have signed memorandums of understanding with TransCanada and graciously allow Hyperion to receive 75,000 barrels per day off the Keystone line.

Hyperion could save money if it didn't have to build its own expensive pipeline.